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10 February 2014

Rise of emerging economies changes the world trade map

The evolution of supply chains is forging new trade corridors around the world, creating new opportunities in emerging market economies.

"It's not just about trade between for example China and the U.S. or China and Europe. There are new strands of activity that are growing fast," says Adrian Rigby, Global Deputy Head of Trade and Receivables Finance for HSBC in London. "In more difficult economic times, businesses are re-engineering themselves and hunting out new markets."

Many of the new opportunities arise in fast-growing emerging market economies, especially those with expanding import and export markets. The trade aspect is important because it indicates a certain level of interconnectedness with global supply chains, as well as a certain threshold of infrastructure and regulatory development to make it possible to do business.

"You can't have network trade without industrialization," says Richard Kozul-Wright, Head of the Unit on Economic Cooperation and Integration among Developing Countries at the United Nations Conference on Trade and Development (Unctad), in Geneva. Network trade accounts for more than 75% of total developing country trade, with China responsible for about 60% of that.

Trade by low- and medium-income countries has increased to about 20% of world trade today from about 8% in the early 1990s. The trend of developing economies of the world trading between themselves, often called south-south trade, has picked up speed since the 2008 global economic crisis, says Przemyslaw Kowalski, Economist at the Organization for Economic Cooperation and Development in Paris. Some developed countries still haven't recovered fully from the crisis, while others—mostly emerging market economies—didn't dip as much and have fully recovered in trade.

That means that since the economic crisis, opportunities for new business or growth of existing business may exist in markets that weren't very evident before the crisis, Mr. Rigby of HSBC says. "Corridor creators" are what HSBC calls businesses that seek out the best trade partners to drive competitive advantage, regardless of location.